Does your state require that you carry a surety bond, often called a contractor's license bond? Are you aware of the many different requirements for each state? As a contractor it's essential that you discover how to obtain your contractor bond and why you are required to carry it.
First and foremost what is a contractor's license bond?
A contractor's bond is purchased by a contractor as a guarantee to their clients of these compliance with state laws. This gives the client with financial assurance. The particulars of the size, what can cause a payout and what other forms may be required differ from state to state.
Contractor's License Bonds may be similar from state to convey; however, there are important differences and requirements that needs to be understood. Like:
Arizona -
- License bonds are expected by the Arizona Registrar of Contractors
- A bond must cover damages because of noncompliance with license standards
- Bonds vary by size from $2,500 to $90,000 dependant on their license type and how much volume of work a contractor performs
- Contractors which have conducted business in Arizona for less than annually are also required to obtain a Sales Tax Bond.
California -
- License bonds are expected by the California Contractors State License Board (CSLB)
- A bond must cover damages caused by violations of the Contractors License Law
- All contractors license bonds are for $12,500
- Responsible Managing Employees and Responsible Managing Officers that own less than 10% of the company are expected to obtain a different $12,500 bond
- The CSLB may need a separate Disciplinary Bond for contractors who have been disciplined; the amounts of these vary.
New Mexico -
- License bonds are expected by the New Mexico Regulation & Licensing Department
- A bond must buy cost to repair building code violations
- All contractors license bonds are for $10,000
Nevada -
- License bonds are expected by the Nevada State Contractors Board (NSCB).
- A bond must cover willful and deliberate violations of a structure contract as well as employees damaged by a contractor's failure to cover wages
- Vary by size from $1,000 to $50,000 and are set by the NSCB. Their decision is based on such factors as type of business, experience and monetary limit granted.
- Residential pool and spa contractors must also obtain a client protection bond. The amount, also set by the NSCB, varies from $10,000 to $400,000
Oregon -
- License bonds are expected by the Oregon Construction Contractors Board (CCB) and the Oregon Landscape Contractors Board
- A bond is needed in the event the contractor is ordered by the CCB to cover damages as the result of a CCB final order
- Vary by size from $3,000 to $75,000 dependant on their license endorsement classification as well as how much volume of work a contractor performs. Contractors that work on public works projects bigger than $100,000 must obtain a $30,000 Public Works Bond.
Washington -
- License bonds are expected by the Washington State Department of Labor & Industries
- Required to cover unpaid wages, unpaid material suppliers, unpaid taxes to the State of Washington and to cover damages because of breach of contract
- Vary by size from $4,000 to $12,000 with respect to the type of contractor
Whether or not your state takes a license bond, you will find other bonds that may be required by the project you are bidding on.
Other forms of contractor's bonds:
Bid Bonds - Submitted by the contractor along with his bid for a particular project. Usually 5-20% of the total bid. A bid bond protects projects from contractors which have bid too low and discover that they cannot meet their bid obligations. invest bonds UK
Performance Bonds - This kind guarantees contract performance by the contractor. The surety company's capital and surplus back this guarantee up to the financial limit of the bond.
Payment Bonds - Guarantees that the contractor will pay certain bills for labor and materials. The surety company backs this guarantee up to the financial limit of the bond.
